TMI Blog2021 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... ose truly and correctly all material facts for the purpose of assessment. Thus we hold that the reassessment is bad in law and quash the same. - Decided in favour of assessee. - ITA No. 1342/Bang/2017 - - - Dated:- 23-6-2021 - Chandra Poojari, Member (A) And Beena Pillai, Member (J) For the Appellant : Sumeet Khurana, CA For the Respondents : Kannan Narayanan, Jt. CIT (DR) ORDER Chandra Poojari, Member (A) 1. This appeal by the assessee is directed against the order of CIT(Appeals)-7, Bengaluru dated 7.3.2017 for the assessment year 2008-09. 2. The assessee has raised the following grounds:- Revised grounds of appeal The grounds hereinafter taken by the Appellant are without prejudice to one another Grounds of appeal arising from order passed by Commissioner of Income-tax (Appeals) (CIT(A)] 1. That the learned CIT(A) erred in upholding the action of the learned Assessing Officer (hereafter referred to as the learned AO) in adding back excess provision written back amounting to ₹ 16,300,116 while computing the taxable income of the Company and also, holding that provision written back during the year under appeal cannot be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 23.7.2017 was available on record before the CIT(Appeals) and pleaded that the additional grounds be admitted relying on the following judgments:- Jute Corporation of India Ltd. 187 ITR 688 (SC) Ahmedabad Electricity Co. Ltd. and Godavari Sugar Mills Ltd. v. CIT, 199 ITR 351 (Bom) New India Industries Ltd., 207 ITR 1010 (Guj) National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC) Ashok Vardhan Birla, 208 ITR 958 (Bom) Controller of Estate Duty v. R. Brahadeeswaran, 163 ITR 680 (Mad) 5. On the other hand, the ld. DR raised serious objections for admission of additional grounds. 6. We have perused the material on record on the admission of additional grounds. Since the facts relating to the issues raised in the additional grounds are already on record, placing reliance on the decision of National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC), we admit the additional grounds for adjudication. 7. The assessee has not pressed ground No. 3 and additional ground No. 5 before us. Accordingly, these grounds are dismissed as not pressed. 8. Regarding additional ground No. 4, the facts are that the assessment was completed u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening of assessment is done after the expiry of four years from the end of relevant assessment year. He submitted that when there is no failure on the part of assessee to disclose truly and fully all material facts necessary for assessment and further where the AO has applied his mind and being satisfied with the claim of assessee and allowed the case of assessee, the AO could not have initiated proceedings u/s. 147 of the Act, after 4 years from the end of relevant assessment year when original assessment was completed u/s. 143(3) of the Act. According to the ld. AR, the AO in the original assessment called for various information and assessee furnished the same at various stages and after considering the same, the AO came to the conclusion that the claim of assessee for deduction u/s. 10A of the Act is in order and allowed the same by taking a conscious decision on the said issue. According to the assessee, the reopening is bad in law and accordingly the impugned assessment order is liable to be quashed. He relied on the following judgments:- - Oracle Systems Corporation v. ADIT [2015] 62 taxmann.com 291 - Usha Exports v. ACIT (WP No. 2506 of 2019) In the above j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 in response to notice under section 148 disclosing fully and truly all material facts necessary for the assessment. 14. In the present case, there was regular original assessment that was completed u/s. 143(3) r.w.s. 144C on 24.1.2012. During the course of original assessment proceedings, deduction u/s. 10A was considered by the AO and granted accordingly. In the reasons recorded, there was no allegation by the AO that there was any failure on the part of assessee to disclose truly and correctly all material facts necessary for assessment. Without any such allegation, the AO in the present case recorded the reason for reopening the assessment. Thus, we are of the opinion that assessment was reopened merely on a change of opinion without any fresh material or any allegation by the AO that assessee failed to disclose truly and correctly all material facts for the purpose of assessment. 15. The Hon'ble Apex Court in the case of New Delhi Television v. DCIT [ (2020) 116 taxmann.com 151 (SC)] had held that reopening of the assessment beyond four years is bad in law when the tax payer has disclosed the facts at the time of original assessment proceedings and the A.O. did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Lakhmani Mewal Das, 103 ITR 437 are as under:- The reasons for the formation of belief must have a rational connection or relevant bearing on the formation of the belief. Formation of belief postulates that there must be a direct nexus or live link between the material coming to the notice of the income tax offices and the formation of his belief that there has been an escapement of income of the assessee from assessment. 20. The Bombay High Court in the case of Nirmal Bang Securities Pvt. Ltd., reported in 382 ITR 93 after noticing the reasons recorded and the legal position as well as the statutory provisions of the Act in para [24] of the judgment, held as under: - In view of the aforesaid well-settled legal position and there admittedly being not even an allegation in the reasons recorded that there was any failure on the port of the petitioner to disclose truly and fully all material facts necessary for assessment, let alone the details thereof, the impugned notice dated March 30, 2007 and the impugned order dated December 8, 2007 are liable to be quashed and set aside on this ground of our . 21. The Ld. AR placed reliance on the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self explanatory and should not keep the assessee guessing for the reasons. Persons provide the link between conclusion and evidence. The reason recorded must be based on evidence. The Assessing Office, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the Assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against the reopening of the concluded assessment. The reasons recorded must either stand or fall on the reasons as recorded alone and nothing else. 23. The Calcutta High Court in the case of Equitable Investment Ltd. vs. ITO (174 ITR 74) wherein it was held as follows:- The powers of the Income-tax Officer to reopen assessments though wide, are not plenary. The words of the statute are 'reason to believe' and not 'reason to suspect'. The reopening of the assessment after the lapse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. 25. At this stage, it is appropriate to mention the principles of law governing reassessment as below:- (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. (ii) He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some ITA No. 205/Bang/2020 link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression tangible material does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the Court cannot be substituted for the reasons to believe . (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression reason to believe appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts ITA No. 205/Bang/2020 indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xix) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by the Assessing Officer regarding the escapement of the income but then, while recording the reasons for the belief formed, the Assessing Officer is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the Assessing Officer had cause or justification to know or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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